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What do we mean by “internationally recognized human rights”? What is an example of a human right? How could a company’s activities infringe on somebody’s human rights? This concise table lays out what human rights are and gives concrete examples of how businesses can impact them.

Examples of internationally recognized human rights

The table draws on the publication by the UN Office of the High Commissioner for Human Rights, International Business Leaders Forum and the Castan Centre for Human Rights Law, Human Rights Translated: A Business Reference Guide (2008), which is an excellent source of additional information and guidance for companies.

What is human rights due diligence? How do the Guiding Principles define stakeholders? This short glossary provides standard definitions for some of the most common terms related to the Guiding Principles, as well as corporate disclosure on human rights.

Many of these definitions are drawn from The Corporate Responsibility to Respect Human Rights: An Interpretative Guide.

Summary

This report provides an analysis of corporate reporting related to human rights from October 2013 to March 2014. Since that time, corporate reporting has further evolved. To see more examples of corporate reporting on human rights, we suggest exploring the many companies listed in the UN Guiding Principles Reporting Database. For examples of good corporate reporting on human rights, we recommend reading Examples of Good Reporting on the UNGP Reporting Framework website.

The underlying research for this report was commissioned by Shift to build understanding of how leading companies across different sectors currently report on their human rights performance, and how this disclosure relates to the UN Guiding Principles on Business and Human Rights. The research was desk-based, using the information publicly reported during the period from October 2013 to March 2014 (or earlier) by the 43 companies in the research sample.

The findings summarized here indicate that many companies already disclose information about their human rights performance in relation to the key components of the corporate responsibility to respect human rights, as set out in the UN Guiding Principles. However, most disclosure on human rights is at present limited to relatively general statements about process, with little information disclosed about how these relate to specific risks or impacts, or company responses to them.

That said, examples included within the research sample also illustrate that fuller and more specific disclosure on human rights performance is feasible. Companies whose disclosure is excerpted in this report include Rio Tinto, Nike, Gap Inc., HP, Anglo American, Ford Motor Company, PVH, Timberland, Nestlé, Coca-Cola Company and AngloGold Ashanti.

General trends identified within the research sample are as follows:

• The majority of companies in the research sample have committed to the corporate responsibility to respect human rights and publicly disclose this commitment in a stand-alone Human Rights Policy, Code of Business Conduct, Supplier Code, or other company-provided statement.
• Many companies are reporting on human rights due diligence, although often providing information in high level statements rather then explaining their processes for implementing their commitment to respect for human rights.
• Many companies are disclosing information about Assessing Impacts, Integrating & Acting, and the importance of Grievance Mechanisms. However, companies are typically disclosing that they acknowledge the importance of these principles and do not necessarily provide further information about their specific processes and programs.
• Often, the most detailed disclosure within a report is related to disclosure on supply chain contexts. This information typically relates to tracking performance and details of compliance audits.
• Many companies disclose information about stakeholder engagement processes. However, they often describe processes that are led by corporate headquarters. Few companies disclose evidence of how they engage affected stakeholders in their processes for assessing impacts or tracking the effectiveness of actions taken.
• The companies’ with the strongest disclosure in the research sample were fairly evenly divided between European- and North American-headquartered companies.
• The European companies tended to have stronger disclosure about their human rights policy commitment and overall human rights due diligence processes, while the North American companies were stronger in disclosure about how they integrate and act on the impacts they identify and track their performance, albeit with a strong emphasis on supply chains.
• Regarding sectoral trends, the companies with the strongest disclosure tended to be in the extractive sector, followed by those companies whose disclosure focuses primarily on supply chain impacts – notably (and in order) the apparel; food, beverage and agriculture; and ICT sectors.

This resource was developed through extensive confidential interviews with industry, analyses of 50 publicly available cases, as well as field work in Peru. It contains a typology of costs that are of relevance to companies well beyond the extractive sector. The summary below is excerpted from the resource.

Summary

Over the past decade, high mineral and energy commodity prices have driven expansion of the extractive sector. Mineral and energy developments profoundly transform environments, communities and economies – and can often generate social conflict. This study seeks to answer the question: if the costs of conflict experienced by companies in the extractive industry were better understood, would relationships between companies and local communities receive greater priority and attention?

Through in-depth interviews and empirical case analysis, the study explores the value at stake when companies in the extractive sector experience conflict with local communities. The study involved detailed case analysis of publicly available information regarding 50 situations of prolonged or otherwise significant company-community conflict, as well as 45 in-depth confidential interviews with individuals from, or with great experience in, the extractive industry.

The research shows that most extractive companies do not currently identify, understand and aggregate the full range of costs of conflict with local communities. Although company-community conflict may generate the same broad effects as those caused by technical problems, contractual or regulatory disputes, or environmental or safety breakdowns (such as a reduction in or suspension of operations), it is typically not given equivalent attention or resources. In the research, costs were understood broadly as meaning any negative impacts on a company’s tangible or intangible assets, including value erosion, from failing to avoid, mitigate or resolve conflict at an early stage. 

The case analysis revealed that environmental impacts such as pollution typically precipitate or trigger conflict, while broader social and economic issues (such as the distribution of project benefits or the quality of the company’s ongoing consultation processes) typically underlie situations of conflict. These underlying issues can affect the quality of the relationship between the company and community and lead to a situation in which a trigger is more likely to set off a confrontation. Nearly half of the cases analyzed involved a blockade, while a third involved a fatality or injuries, damage to property, or the suspension or abandonment of a project – a particular risk in the feasibility and construction stages.

The research explored the most frequent, greatest, and most often overlooked costs of company-community conflict. The most frequent costs were those arising from lost productivity due to temporary shutdowns or delay. For example, a major, world-class mining project with capital expenditure of between US$3-5 billion will suffer costs of roughly US$20 million per week of delayed production in Net Present Value (NPV) terms, largely due to lost sales. Direct costs can accrue even at the exploration stage (for example, from the standing down of drilling programs).

The greatest costs of conflict identified through the research were the opportunity costs in terms of the lost value linked to future projects, expansion plans, or sales that did not go ahead. The costs most often overlooked by companies were indirect costs resulting from staff time being diverted to managing conflict – particularly senior management time, including in some cases that of the CEO. There may also be costs associated with the inability to recruit and/or retain top talent, particularly in the community relations function.

The “language of costs” was seen as being particularly useful for a company’s community relations/social performance team in reaching two key audiences: senior management and financial colleagues. One company had undertaken a systematic review of the potential costs of nontechnical risks connected to its various projects and identified a significant figure – a value erosion of more than $6 billion over a two-year period, representing a double-digit percentage of its annual profits – which it used to attract Board-level attention to these issues.

Interviewees cautioned against relying on pure cost-benefit analysis; rather, those within companies that had experienced success with cost-based arguments emphasized the need to tie them closely to anecdotal experiences and to the company’s own values when communicating with internal audiences. The need for reliable data was emphasized; interviewees noted various challenges in determining causality when attributing certain costs to company-community conflict, and in aggregating costs across different projects or regions.

Interviewees saw a need for extractive companies to better understand the costs – in the sense of loss of value – that can arise from failing to build sustainable relationships with local communities; for example, a less-resilient supply chain or an unreliable local workforce, and the impact that this can have on core business. They highlighted the need for companies to distinguish their social investment spend from what they allocate to social risk mitigation; confusing the two tends to lead to a focus on money rather than on building relationships, as a way to address problems, and to rewarding those individuals who are most vocal while ignoring others who may also have real concerns.

Industry experts observed that the triggers of company-community conflict are increasingly predictable, yet not enough companies are using root cause analysis or similar processes to evaluate such incidents and learn the relevant lessons. Certain other company systems and processes were seen as particularly relevant to identifying (and preventing) costs arising from conflict, including impact assessment, risk and commitment registers, and operational-level grievance mechanisms.

Taking the necessary time to prevent and address such conflict, particularly the time needed to build sustainable relationships through engagement with local communities, is often in tension with short-term production targets or ambitious construction schedules. A failure to identify the connections between distinct budget lines (eg, between security costs and community relations) can also limit understanding of these issues. Conversely positive internal incentives can help enhance attention to the costs of conflict – and the action needed to prevent it. The research highlighted some examples of creative approaches to social performance objectives and indicators by extractive companies.

External incentives that can enhance company attention to these issues include evidence of impacts on capital – for example, in a key study analyzing the impact of company-community relationships on the stock prices of Canadian gold mining juniors. Reputational impacts remain hard to quantify, but heightened stakeholder attention to issues of materiality and reporting regarding social impacts appear likely to drive greater attention to this area.

Interviewees observed that effective management of community expectations requires “frontloading” the company’s investment in community relations. This may be easier for large multinationals with positive cash flow, while smaller and medium-size companies may face constraints in this regard. Limits on cash flow at the start of a project can lead a company to adopt an approach that relies on remediation of social impacts after things have gone wrong, rather than seeking to prevent impacts, and conflict, from occurring. Yet experienced interviewees emphasized that it only gets more expensive to try to “buy support” later in the project lifecycle and that this almost never leads to sustainable relationships. Analyzing the costs of conflict can thus help community relations staff to make the business case for increased attention to community engagement before severe impacts occur and the company reaches a tipping point in its relationships.

Finally, the research explored a number of market drivers of greater company attention to company-community relationships. These include project lenders and insurers, some of whom are increasingly sensitive to their clients’ social risk exposure – and to their own as a result. In some cases, this is translating directly into financial risk for lenders. For example, there is emerging evidence in Peru to show that banks are exposed to higher default rates on the financial support that they provide to small businesses or individuals in areas around extractive projects that are experiencing high levels of company-community conflict. There is also increasing awareness of these issues among juniors because of the growing implications for successful onwards sale of assets, and among business customers and consumers in areas like conflict minerals and coal. Government, of course, can play a variety of roles – as a source of positive pressure on the sector, as a hindrance to company efforts, or as a potential partner in joint venture situations.

Overall, the research suggests that improved identification and analysis of the costs of company-community conflict is important for the extractive sector. It identifies a range of factors that are likely to influence the extent to which companies pay attention to these costs, and invest in the underlying relationships with local communities.